## Facts

- Peabody Coal Company (Peabody) drilled exploratory test holes in search of coal deposits.
- Peabody entered into an oral agreement with A.I.R. Threadgill (Threadgill), an independent contractor, to probe and “log” Peabody’s test holes.
- During probing operations, Threadgill’s probing device became stuck in one of the test holes and could not be retrieved.
- Peabody’s employees participated in efforts to recover the stuck probe, but the equipment was not recovered.
- Threadgill claimed that, in the coal industry, there was a custom that when probing equipment is lost in a hole, the coal company reimburses the tester for the cost of the lost equipment when the parties’ agreement is silent on the point.
- Peabody did not reimburse Threadgill for the lost probe.
- Threadgill sued Peabody asserting negligence and breach of contract (based on the oral contract as supplemented by coal-industry custom).
- The trial court found Peabody was not negligent and did not decide whether Threadgill was negligent.
- The trial court nonetheless held Peabody liable for breach of contract and entered judgment for Threadgill.
- Peabody appealed.

## Issues

1. Whether a coal-industry trade usage could be treated as an implied term of the parties’ oral contract requiring the coal company to reimburse the tester for lost probing equipment when the contract is silent.
2. Whether the trial court erred by imposing contract liability without making findings on Threadgill’s alleged negligence and its effect on the claimed right to reimbursement.

## Decision

- The court held that evidence of a sufficiently established coal-industry custom could supplement the oral agreement and support an implied contractual duty to reimburse for lost probing equipment.
- The court held the trial court erred by failing to make necessary findings on Threadgill’s negligence where that issue could affect liability and related claims between the parties.
- The judgment was reversed and the case was remanded for further proceedings consistent with these rulings.

## Legal Principles

- A contract, including an oral contract, may be supplemented by a usage of trade when the usage is sufficiently uniform, general, and established in the industry such that parties in that business can be treated as contracting with reference to it.
- A party may be bound by trade usage when the party has actual knowledge of the usage or when the usage is so common in the trade that the party can fairly be charged with knowledge.
- Trade usage may fill a gap in the parties’ agreement, but it cannot contradict an express term of the contract.
- When a party’s right to recover may depend on whether its own negligence caused the loss, the trial court must make findings on that issue rather than treating it as immaterial.

## Conclusion

Threadgill’s oral agreement with Peabody could be supplemented by coal-industry custom requiring the coal company to reimburse a tester for lost probing equipment when the contract is silent, but the trial court could not impose liability without addressing whether Threadgill’s own negligence contributed to the loss; the case was reversed and remanded for findings and further proceedings.


Threadgill v. Peabody Coal Co., 526 P.2d 676 (1974)